VCE ACCOUNTING UNITS 3&4 SMARTSTUDY EXAMS

Question 4 (13 m arks)

In January 2022, th e accountantfor D e Plete G ard en Sup p lies p rovid ed th e follow ing bud g eted inform ation
for th e year end ing 31 D ecem ber 2022:
• Sales are exp ected to be $500 000 p lus G ST (40% on cred it).
• Cred itp urch ases are exp ected to be 60% of sales (allinventory is p urch ased on cred itand no d iscounts
are offered from sup p liers).
• D raw ing s are exp ected to be $40 000 cash and $1 000 inventory.
• Sales returns are exp ected to be $3 000 p lus G ST w ith a cost p rice of $2 000.
• Allsales returns are exp ected to be returned to sup p liers.
• D iscount exp ense is exp ected to be $4 000.
• Inventory w rite-d ow ns are exp ected to be $2 000.
Based on th ese fig ures, th e accountanth as p rovid ed th e follow ing estim ates for ch ang es in accountbalances:

Account 1 Jan 2022 (actual) 31 Dec 2022 (expected)

Inventory 180 000 190 000
Accounts Payable 40 000 40 000
Accounts Receivable 30 000 25 000

a. Reconstruct th e Accounts Receivable accountin ord er to calculate th e exp ected cash

received from Accounts Receivable d uring th e year end ed 31 D ecem ber 2022. 5 m arks
b. Reconstruct th e Inventory account in ord er to calculate th e exp ected Cost of Sales
(on sales)d uring th e year end ed 31 D ecem ber 2022. 5 m arks
c. Reconstructth e Accounts Payable accountin ord er to calculate th e exp ected p aym ents
to Accounts Payable d uring th e year end ed 31 D ecem ber 2022. 3 m arks

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 PRACTICE EXAM 3

D OCUM EN T 4

Terry's Tents Memo: No. 2

43 Long Street
31 January 2020
Elsternwick
An Account Receivable, K Elias, has been declared bankrupt. The
business has received 20 cents in the dollar of the amount owing
($220) (Rec. 9). Record the receipt and write off the balance of
the account.
Signed: Terry

a. W ith reference to a q ualitative ch aracteristic, exp lain th e need for source d ocum ents. 2 m arks
b. Record th e inform ation from D ocum ents 1 to 4 in th e G eneralJournal.
N arrations are not req uired . 6 m arks
c. Exp lain w h y an exp ense is created as a resultof D ocum ent4. 2 m arks
d. Sh ow th e Accounts Receivable accountin th e G eneralLed g er at 31 January 2020 after
p osting th e journalentries com p leted in your answ er to part b. 4 m arks
e. A fifth d ocum entis sh ow n below .
D OCUM EN T 5
Date: 4/2/20
Payee: D Banks
For: Wages
For period 28/1/20 to 4/2/20
(includes $600 owing at 31/1/20)
This Cheque: 4 600
Cheque No: 410

Record D ocum ent5 in th e G eneral Journal.

A narration is not req uired . 2 m arks

19
 PRACTICE EXAM 3

Question 7 (14 m arks)

Rog er Old rid g e ow ns a business, Sw eatm aster, w h ich sells g ym eq uip m ent.Allsales h ave been on cash but
Rog er is consid ering introd ucing cred itsales in 2022 w ith cred it term s of 5/7, n/45.
W h en p rep aring th e bud g ets for 2022 th e follow ing inform ation w as used :
Estimates for year ending 31 December 2022:
• Cash sales are estim ated to be $9 0 000 p lus G ST (Cost of Sales:$58 500).
• Cred it sales are estim ated to be $30 000 p lus G ST (Cost of Sales:$19 500).
• Sales return is exp ected to be $5 000 p lus G ST (Cost of Sales:$3 9 00).
• All sales returns w ere returned to th e sup p lier.
• Th e closing balance in th e Accounts Receivable accountis estim ated to be $3 000.
• D iscountexp ense is estim ated to be $60.
• Th e Accounts Payable balance at1 January 2022 is $6 000 and itis estim ated to increase by $4 000 by
th e end of th e year.
• Inventory p urch ases on cred itare estim ated to be $70 000 p lus G ST and cash $20 000 p lus G ST.
• W ag es accrued at31 D ecem ber 2022 are estim ated to be $2 400.W ag es p aid d uring th e year w ere
$20 000, includ ing th e am ount ow ing at 1 January 2022 of $600.
• D raw ing s are estim ated to be $10 000 (includ ing $2 000 d raw ing s of inventory).
• Office exp enses are estim ated to be $24 000 (includ ing $2 500 d ep reciation of eq uip m ent).
• Th e loan rep aym ent is estim ated to total $4 400 (includ ing interestof $400).
• Th e inventory w rite-d ow n is estim ated to be $1 000.

Actual sales in D ecem ber 2021 w ere $5 000 p lus G ST.

Estim ated sales for D ecem ber 2022 are $8 000 p lus G ST.
a. Prep are th e Bud g eted Incom e Statem ent for th e year end ed 31 D ecem ber 2022. 8 m arks
b. Exp lain h ow th e accrued w ag es w ould ap p ear in th e Balance Sh eet as at31 January 2022. 2 m arks
c. D iscuss th e im p lications of introd ucing cred it sales in 2022. 4 m arks

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 PRACTICE EXAM 4

Question 8 (10 m arks)

On 31 D ecem ber 2020, th e accountant p rovid ed th e follow ing inform ation:
Sales for th e year end ed 31 D ecem ber 2020 w ere $60 000.
31 December 2020 (actual) 31 December 2021 (estimate)
Accounts Receivable 10 000 16 000
Inventory 12 000 14 000
Accounts Payable 9 000 15 000

Estim ates for year end ing 31 D ecem ber 2021:

• All inventory transactions are on cred it.
• Sales are exp ected to increase by 20% .
• D iscountexp ense is exp ected to be 1.5% of sales includ ing G ST.
• M ark-up on sales is exp ected to be 60% .
• Inventory w rite-d ow n is exp ected to be 1% of sales.
• D raw ing s of inventory is exp ected to be $2 78 0.
Reconstructth e G eneral Led g er accounts p rovid ed in th e W orking Sp ace Booklet to d eterm ine
th e estim ated :
a. cash collected from Accounts Receivable. 4 m arks
b. cash p aid to Accounts Payable. 6 m arks

35
VCE ACCOUNTING UNITS 3&4 SMARTSTUDY EXAMS

Question 9 (11 m arks)

On 31 D ecem ber 2021, th e accountant p rovid ed th e follow ing inform ation:
Tony’s Tents
Trial Balance as at 31 December 2021

Account Debit Credit

Accounts Payable 6 000
Accounts Receivable 14 000
Accrued Interest Revenue 420
Accrued Wages Expense 200
Accumulated Depreciation of Shop Fittings 4 800
Bank 5 100
Capital 19 000
GST Clearing 1 520
Inventory 8 000
Loan (interest-only Loan repayable 1 January 2026) 30 000
Shop Fittings 22 000
Term Deposit (due 31 May 2022) 12 000
61 520 61 520

Estim ates for year end ing 31 D ecem ber 2022:

• Totalsales are exp ected to be $75 000.
• Cred it sales are exp ected to be 50% g reater th an cash sales.
• Sales returns are exp ected to be 5% of cred itsales.Th ere w ere no p urch ase returns.
• M ark-up on sales is 100% .
• Inventory w rite-d ow n are exp ected to be $1 000.
• All inventory p urch ases m ad e on cred itare exp ected to be $44 000 (includ ing G ST).
• Th e Accounts Payable balance is exp ected to increase by 20% .
• G ST Settlem ent p aid to th e ATO is exp ected to be $4 000.
• Th e term d ep osit w as for th e year end ing 31 M ay 2022. Interest on th e term d ep osit is $720 and w ill
be received at m aturity.
• Th e bankbalance is exp ected to rem ain p ositive.
• D ep reciation exp ense for sh op fitting s is exp ected to be $1 500.
• D raw ing s for th e year are exp ected to be $20 000 ($2 500 inventory and $17 500 cash ).
• W ag es are exp ected to be $20 000 (includ ing accrued w ag es at 31 D ecem ber 2021).
• Rent exp ense is exp ected to be $3 300 (includ ing G ST).
• Interest exp ense is exp ected to be $3 600.
• W ag es ow ing at 31 D ecem ber 2022 are exp ected to be $500.
• Th ere are no p rep aym ents or oth er accruals exp ected at31 D ecem ber 2022.

a. Prep are a Bud g eted Incom e Statem ent for th e year end ing 31 D ecem ber 2022. 8 m arks
b. Prep are th e Eq uities section of th e Bud g eted Balance Sh eet as at31 D ecem ber 2022. 3 m arks

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 SOLUTIONS TO PRACTICE EXAM 2

b.
General Journal

Date
Details Debit Credit
2023
30 Jun. Bank 12 688
Loan – NT Finance 12 688
Vehicle 10 580
GST Clearing 2 108
Bank 12 688
OR
General Journal

Date
Details Debit Credit
2023
30 Jun. Bank 12 688
Loan – NT Finance 12 688
Vehicle 21 080
GST Clearing 2 108
Disposal of Vehicle 10 500
Loan – NT Finance 12 688
4 m arks

Question 4 (13 m arks)

a.
Accounts Receivable

Date Date
Cross-reference Amount Cross-reference Amount
2022 2022
1 Jan. Balance 30 000 31 Dec. Sales Returns/GST Clearing 3 300
31 Dec. Credit Sales/GST Clearing 220 000 Discount Expense 4 000
Bank 217 700
Balance 25 000
250 000 250 000

Cash Expected from Accounts

$217 700
Receivable:

5 m arks

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 SOLUTIONS TO PRACTICE EXAM 3

Practice Exam 3

Question 1 (16 m arks)

a. Explanation: Verifiability refers to th e ability to ensure th atd ifferentknow led g eable and
ind ep end ent observers can reach a consensus (arrive at th e sam e conclusion)th at a p articular
d ep iction of an event is faith fully rep resented .Verifiability is m aintained by retention of source
d ocum ents used to record th e transaction and ch ecked th roug h aud iting .Th e p urp ose of verifiability is
to h old th e accounting p rofessionalaccountable for th eir w ork.
Qualitative characteristic: Verifiability
2 m arks
b.
General Journal

Date
Details Debit Credit
2020
29 Jan. Bank 1 650
Cash Sales 1 500
GST Clearing 150
Cost of Sales 750
Inventory 750
29 Jan. Prepaid Rent Expense 3 000
GST Clearing 300
Bank 3 300
29 Jan. Accounts Receivable – S Chen 880
Credit Sales 800
GST Clearing 80
Cost of Sales 400
Inventory 400
31 Jan. Allowance for Doubtful Debts 160
GST Clearing 16
Bank 44
Accounts Receivable – K Elias 220

6 m arks
c. Explanation: Exp enses are d ecreases in assets th atresult in a d ecrease in ow ner’s eq uity oth er th an
th ose relating to d istributions to th e ow ner.Exp enses encom p ass losses as w ellas th ose exp enses th at
arise in th e course of th e ord inary activities of th e business.Bad d ebts are an exp ense because th ey
result in a d ecrease in assets th at d ecrease ow ner’s eq uity.
2 m arks

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VCE ACCOUNTING UNITS 3&4 SMARTSTUDY EXAMS

d.
Accounts Receivable

Date Date
Cross-reference Amount Cross-reference Amount
2020 2020
1 Jan. Balance 2 200 31 Jan. Bank 44
31 Jan. Sales/GST Clearing 880 31 Jan. Allowance for Doubtful Debts/GST Clearing 176
31 Jan. Balance 2 860
3 080 3 080
1 Feb. Balance 2 860

4 m arks
e.
General Journal

Date
Details Debit Credit
2020
4 Feb Accrued Wage 600
Wages 4 000
Bank 4 600

2 m arks

Question 2 (11 m arks)

a.
General Journal

Date
Details Debit Credit
2019
30 Jun Sales 25 000
Interest Revenue 180
Inventory Gain 220
Profit and Loss Summary 25 400

2 m arks
b. Explanation: Revenue and Exp ense accounts are closed so as to p rep are th e accounts for th e
p rep aration of rep orts, to ‘z ero off’ th e accounts and h ave accounts read y for th e next
rep orting p eriod .
2 m arks

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VCE ACCOUNTING UNITS 3&4 SMARTSTUDY EXAMS

Question 7 (14 m arks)

a.
Sweatmaster
Budgeted Income Statement for the year ending 31 December 2022

$ $
Revenue
Cash Sales 90 000
Credit Sales 30 000 120 000
Less Sales Return 5 000
115 000
LESS COST OF GOODS SOLD
Cost of Sales (58 500 + 19 500 – 3 900) 74 100
Gross Profit 40 900
Less Inventory Write-down 1 000
Adjusted Gross Profit 39 900
Less Other Expenses
Wages (20 000 – 600 + 2 400) 21 800
Office Expenses (24 000 – 2 500) 21 500
Depreciation – Equipment 2 500
Interest Expense 400
Discount Expense 60
46 260
Net Profit (Loss) (6 360)
8 m arks
b. Explanation: Th e accrued w ag es w ould ap p ear as a current liability.Th is is because of th e p resent
oblig ation of Sw eatm aster to transfer an econom ic resource (w ag es)as a resultof p astevents
(em p loyee labour).Th is oblig ation of $2 400 is reasonably exp ected to be settled w ith in 12 m onth s
after th e end of th e rep orting p eriod .
2 m arks
c. Discussion: Cred it sales m ay attract custom ers w h o w ould buy now if th ey could p ay later.It m ay
result in m ore custom ers and increased total sales, w h ich sh ould increase netp rofit.
H ow ever, d iscounts w illincrease exp enses and could increase th e Bad D ebts exp ense, th us d ecreasing
net p rofit.It w illalso take long er to receive cash from cred it sales.Custom ers w h o w ere buying for
cash m ay instead take ad vantag e of cred it term s, w h ich m ay h ave a neg ative im p act on liq uid ity.
4 m arks

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VCE ACCOUNTING UNITS 3&4 SMARTSTUDY EXAMS

Question 7 (9 m arks)
General Journal

Date
Details Debit Credit
2023
11 Jan. Accounts Receivable – Hume Golf Club 6 200
Sales Revenue 5 500
GST Clearing 700
Cost of Sales 3 500
Inventory 3 500
31 Jan. Unearned Sales Revenue 1 500
Sale Revenue 1 500
1 Mar. Bank 5 288
Accrued Interest Revenue 240
Interest Revenue 48
Term Deposit 5 000

9 m arks

Question 8 (10 m arks)

a.
Accounts Receivable

Date Date
Cross-reference Amount Cross-reference Amount
2021 2021
1 Jan. Balance 10 000 31 Dec. Discount Expense 1 188
31 Dec. Credit Sales 72 000 Bank 72 012
GST Clearing 7 200 Balance 16 000
89 200 89 200

Estimated Collections from

$72 012
Accounts Receivable:
4 m arks

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VCE ACCOUNTING UNITS 3&4 SMARTSTUDY EXAMS

Question 9 (11 m arks)

a.
Tony’s Tents
Income Statement for year ending 31 December 2022

$ $
Revenue
Cash Sales 25 000
Credit Sales 50 000 75 000
Less Sales Return 2 500
72 500
LESS COST OF GOODS SOLD
Cost of Sales 36 250
Gross Profit 36 250
Less Inventory Write-down 1 000
Adjusted Gross Profit 35 250
Add Other Revenue
Interest Revenue 300
35 550
Less Other Expenses
Wages 20 300
Rent Expense 3 000
Interest Expense 3 600
Depreciation – Fixtures and Fittings 1 500 28 400
Net Profit 7 150
8 m arks

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